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Divisional applications

January 25, 2016

As we predicted last week, the ILPTO Commissioner today published an announcement in which he rescinded the "no second generation divisonal" practice that had been in place since mid-2010. All's well that ends well, although it would have been nice if had he admitted that the practice was ultra vires.

January 21, 2016

We’ve blogged in the past about the ILPTO’s strange, ultra vires policy announcement in early 2010 to forbid the filing of second-generation divisional applications (2GDs) after the grandparent case has been published for opposition purposes. That announcement, which was based on an absolutely untenable reading of the statute, and which contradicted over 40 years of practice under the statute, came not in the context of a decision in an opposition (where one might have expected to see such a statutory challenge to the grant of a patent raised) but in a circular issued sua sponte by the then-commissioner.

In a decision (in Hebrew) issued on January 12, 2016 in an ex parte proceeding in IL 234696, the present Commissioner has taken a step back from that view, and may be on his way to returning to the status quo ante in which it was possible to file a chain of divisional applications. Unfortunately, the Commissioner’s thinking in this matter is muddled, as will be explained below, and the decision does not contain a clear repudiation of the ILPTO’s anti-2GD stance. We’ll believe that the anti-divisional policy has been killed off when we see an announcement from the ILPTO to that effect.

Background: Statutory Basis for Divisionals in Israel and the 2010 Circular

Section 24(a) of the Israel patent statute says, “As long as the application has not been accepted [i.e. published for opposition purposes – DJF], the applicant is entitled to demand that it be divided into several applications.” Section 24(b) says, “If the application includes more than one invention, then the Registrar may, as long as he has not accepted the application, direct the applicant to divide his application.”

From 1967 when the patent statute was enacted until the spring of 2010, 24(a) was understood by all as referring to any given application: any application could be divided, provided it had not yet been published for opposition purposes. Thus a first divisional could be divided from an original application, which, while the first divisional was pending, could publish for opposition and then issue as a patent. Thereafter, during the pendency of the first divisional but after the publication of the original case, a second divisional could be filed from the first divisional, notwithstanding the publication of the original application in the interim. Both the first and second divisionals would have an effective filing date of the original case and would enjoy any priority claims made therein. The process could be repeated ad infinitum, subject to the 20-year term, which for all the applications in the series would run from the filing date of the original application.

In February 2010, in one of many circulars issued during his tenure, the then-commissioner announced that henceforth, the ILPTO would interpret 24(a) as referring only to the original application. (He subsequently pushed off implementation of the circular by several months.) Thus, once the original application published for opposition purposes, no 2nd- or higher-generation divisionals could be filed from any already-filed, still-pending divisional applications. The rationale given in the circular for this new “policy” was “the need to conclude examination proceedings in a reasonable time and because of considerations of legal certainty for the general public”. In other words, the ability to file divisionals ad infinitum kept “the public” uninformed about the acts that might be enjoined should a grandchild patent issue many years after the first patent.

As we noted then, the problem with this view is that statutory interpretation and administrative polices are different creatures. Administrative policies, like how many months’ extension the Commissioner will grant before a show of cause is required to obtain additional extensions, can only be implemented prospectively, and there may be a delay between an administrative policy being announced and its implementation. Statutory interpretation, by contrast, has immediate effect, both prospectively and retrospectively. If the statute precludes the filing of 2GDs, then (a) all patents granted in such cases until 2010 time were void, and (b) the ILPTO needed to stop accepting such applications immediately, not several months after the publication of the circular, as the ILPTO stated would be the case.

Challenge to the ILPTO

Since the new “policy” hinged on statutory interpretation, but without retrospective effect, it was only a matter of time until an applicant with a sufficiently valuable patent application and sufficiently deep pockets would challenge the ILPTO. This occurred in late 2014, when Genentech sought to file a 2GD, IL 234696, related to the antibody that is the active ingredient in its blockbuster drug Herceptin.

Aware of the 2010 circular, Genentech asked the ILPTO nevertheless accept the 2GD as a divisional. Genentech raised several grounds for its request, among them that the circular was based on an untenable reading of 24(a), and as a result was ultra vires; that the policy announced in the circular failed to achieve its stated goal, viz. more certainty for “the public”, and therefore should be withdrawn; and that proper statutory interpretation applies retroactively, thus invalidating many already-granted patents if the interpretation proffered by the ILPTO was correct. Genentech did, however, ask that if the Commissioner disagreed about the proper reading of 24(a), and about the scope of his powers (i.e. if the Commissioner believed that the 2010 circular was not invalid), that he nevertheless grant an exception in this particular case and allow the filing of the 2GD. In January 2015 Genentech pled its case in an ex parte hearing before the Commissioner.

Commissioner’s Decision

On January 12, 2016 (yes, a full year after the oral hearing), the Commissioner delivered his decision: Genentech’s application 234696 would be accorded the status of a divisional application.

While the decision is being heralded by the firm that represented Genentech as a reversal of policy and a green light for the filing of 2GDs, in this corner we view the decision as moving in that direction, but not quite getting there. Nowhere does the decision explicitly say that the statutory interpretation expressed in the 2010 circular is wrong, nor does the decision say that that circular is rescinded. The decision does say that it’s time to reconsider the 2010 circular, in light of changed circumstances. But the actual holding in the decision is that in this particular case, the 2GD shall be treated as a proper divisional. Hopefully a rescinding of the 2010 circular is in the works, but until that happens, it’s unclear where the ILPTO stands on the issue of 2GDs generally.

Far more telling is the reasoning, vel non, of the decision. The decision starts out, correctly, saying that this is a matter of statutory interpretation - viz. when S.24(a) refers to “the application” to be divided, does it mean the first application filed in a chain, or does it mean any pending application? But then, rather than simply state “the correct interpretation of the statute is that “the application” refers to any application”, which was what Genentech asked the Commissioner to do, the decision veers in the direction of administrative law, treating statutory interpretation as if this is a matter for PTO administrative policy. The Commissioner thus spends pages and pages justifying why he can now, in accordance with Israeli administrative law, consider deviating from the 2010 circular. This discussion includes statistics on numbers of divisional filings pre- and post-2010 and their percentages among the overall numbers of applications; how the matter of 2GDs is treated in the US, EPO, UK, AU and JP; and public policy concerns about lack of proper notice to “the public” if chains of divisionals are filed. Such public policy concerns are, of course, not the province of the Commissioner but of the legislature.

After this long-winded discourse, the Commissioner states that perhaps the time has come to reevaluate the 2010 circular, since it doesn’t seem to have achieved its purpose (the number of divisionals filed annually since 2010 is up versus the four-year period preceding the circular), and the ILPTO has significantly reduced examination times as well. The Commissioner also acknowledges that in some cases, such as the present one, the early issuance of patents with narrow claims and the later pendency of other applications divided out from the earlier applications may “serve the aims of the statute and the desired legal certainty for the public at large”. He also wonders if implementing a progressive fee scale for divisional applications might not be a bad thing. But his ruling is that, “In view of the foregoing, I find no reason to apply the instructions of Circular MN 81 to the application before me, and I see no reason to prevent further examination of the ‘696 application…. In conclusion, the ‘696 application shall be examined in accordance with the date on which it was filed and in the regular examination queue.”

Analysis

While reaching the correct conclusion – the Genetech ‘696 application should be treated as a divisional of a divisional – there are a number of problems with the Commissioner’s approach in the Genentech decision. Chief among these is the decision’s implicit assumption that administrative law is controlling in this case. That’s plainly incorrect: there's only one correct interpretation of the statute, and statutory interpretation is NOT a matter of PTO administrative policy. Consequently, the Commissioner doesn’t need to engage in hand-waving or go looking for reasons to rescind the 2010 circular, because that circular is not the sort of pronouncement that’s due any deference by subsequent commissioners, or for which changed circumstances need to be considered if the circular is to be revised or trashed. If the view reflected in the circular is correct (and by implication, the practice of the ILPTO for the 43 years before the circular was wrong), then ALL 2GDs are invalid and they always have been, and the ILPTO must continue to refuse to accept them, including in Genentech’s case. If the view in the circular is wrong (which it is), then the Commissioner needed to say so in the Genentech decision, and to say that the 2010 circular is void, because the statute grants applicants the right to file divisionals from ANY pending application, period.

Remarkably, Genentech made these very arguments in its pleadings, but the Commissioner did not deal with them head-on in the decision. It appears the Commissioner was reluctant to admit that his predecessor had exceeded his powers, and that the present Commissioner was complicit in this by failing to rescind the circular years ago (a reluctance reinforced by the year between the oral arguments in the case and the issuance of the decision). One wonders how the Commissioner would have decided this case had Genentech not pled an alternative ground for allowing its application to proceed, viz. that the Commissioner should exercise his discretion and not apply the 2010 circular in this case.

The Commissioner’s accounting for public policy considerations, particularly the “need” of some amorphous “public” for “legal certainty”, viz. to know whether or not that “public” is entitled practice a particular invention or not, is also in error, although entirely typical of Israel Patent Commissioners going back for many years. To the extent that the needs of an amorphous “public” are to be accounted for, the statute itself does that: it says that applicants can file divisonals of divisonals. End of discussion. If a particular individual (say, a multinational pharmaceutical company based in Israel) feels harmed by a particular allowed patent application, the statute gives that individual the power to file a pre-grant opposition to the grant of the patent (which is what happened to applications nos. 136201 and 214084, the grandparent and parent, respectively, of the ‘696 application). But it’s not the place of the Commissioner to re-write the statute in accordance with his perceptions of the need to protect some unspecified “public”.

An additional point, less germane to the analysis of the decision per se but nevertheless instructive, is that the statistical analysis provided in the decision posits that the rise in divisionals since 2010 is due to the issuance of the circular. While that circular certainly played a role, the rise in divisional filings is likely due in part to additional factors, beyond the MN 81 circular. In particular, the adoption of regulations in December 2009 that impose a fee of 500 shekels for each additional claim above 50 probably influenced the increase in divisional filings, since the filing fee for a new application was set at around 2000 shekels. Additionally, not long before the issuance of the 2010 circular, the ILPTO issued a different circular in which it announced that an examiner’s finding of lack of unity of invention under section 8 of the statute constituted an order under 24(b) to divide the application. Per that earlier circular, the filing of a divisional after the allotted time respond to the disunity requires the payment of extension fees. This policy likely also contributed to the rise in the filing of divisional applications. Why neither of these additional factors was mentioned in the Genentech decision is both enigmatic and disconcerting, as it suggests a poor grasp of patent prosecution by the head of the ILPTO.

Ultimately, one gets the feeling from the Genetech decision that the Commissioner intends to revise or rescind the 2010 circular, but on the grounds that circumstances have changed and the policy expressed in the circular no longer needs to be implemented, not because the circular expressed an incorrect view of the statute ab initio. We eagerly await the issuance of such a pronouncement.

October 30, 2013

A recurring theme on this blog is the topic of divisional applications
in Israel, specifically the impropriety
of the Israel PTO’s decision a few years ago to limit the time frame for
the filing of divisionals. A quick
recap: the Israel patent statute allows applicants to divide an application as
long notice of the allowance of the application hasn’t been published. Hence if I have application A, at any time
before the ILPTO publishes notice of its acceptance I may file divisional
application B. I may then file
divisional application C at any time before the ILPTO publishes notice of the
acceptance of application B. And so
on. The end result is that I can keep an
application pending for the entire 20-year term of the original application A,
in the same way that continuation practice in the USA can be used to achieve
the same result.

For over 40 years following the enactment of the statute in 1967, the
ILPTO followed the statute. And then, sua
sponte (or maybe at the behest of someone, like a lobbyist for an industry
with a strong patent antipathy), the Commissioner decided that the ability of
applicants to keep application pending in perpetuity was bad policy. So he unilaterally announced that neither his
predecessors as Commissioner nor the courts that had adjudicated divisionals of
divisionals understood the statute, and that the statute only allows the
filing of progeny applications from application A prior to the publication of
the allowance of A. Hence C, a
divisional of B which is a divisional of A, can only be filed before notice of
the allowance of A is published.

Lest one think that the filing of late-stage divisionals might be
possible in response to a lack-of-unity finding in an earlier divisional
application, the ILPTO published a clarification stating that the limitation on
the timing of the filing of divisionals applies even if the ILPTO makes a
finding of disunity in application B: if publication of the allowance of the
parent application A has already taken place, then the applicant has to choose
which inventions to continue to prosecute and which to give up on, because the
ILPTO won’t allow the applicant to file a divisional of application B.

To date, it appears no applicant has challenged the ILPTO’s illegal
adoption of this policy.

I mention all this – again – because the EPO recently announced
that it is retreating from its similarly ill-advised foray into limiting the
window for the filing of divisionals.
Once upon a time, an applicant could file divisional applications in Europe
ad infinitum, irrespective of the status of the ancestral cases. Then it changed its tune, and said that a divisional application must be filed from a pending patent
application by the later of two years from the issuance of a first Examination
Report for a related family, or two years from the issuance of a new lack of
unity objection. As noted by our
colleagues at Harrison IP, “The two
year period was initially introduced by the EPO to counteract a perceived abuse
of filing long series of divisionals to cause uncertainty to third parties.”

Now the EPO has announced that is
changing tack once again: effective April 1, 2014, EPC Rule 36 will change so that the
only criterion for the filing of a divisional application is that it be a
divisional of a pending European patent application. In order to dissuade the “evergreening” of
applications by the serial filing of divisionals, the EPO is simultaneously
introducing a progressive fee scale for filing divisional patent applications. A
divisional patent application filed from an original European patent
application will only be subject to the regular filing fee (and of course the
retroactive payment of the EPO’s egregious renewal fees, but we’ll leave that
topic for another day). But a divisional
patent application filed from a prior divisional patent application (i.e. a
divisional-of-a-divisional) will incur an additional fee (via an amendment to
Rule 38 EPC). This additional fee will increase in accordance with the generation
of the divisional application. Thus a second generation divisional would cost
less to file than a third generation divisional and so on. The actual fees to
be charged have yet to be announced; like the permissive policy regarding the
timing of the filing divisionals, these additional fees will take apply to divisional
patent applications filed on or after April 1, 2014.

Will the ILPTO follow suit? No predictions here, but it would be
well-advised to do so. Its current
untenable position flat-out contradicts the statute and is therefore ultra
vires; someday the ILPTO’s position is going to be challenged, and
the ILPTO is going to be slapped down by the courts. If the unelected and unaccountable higher-ups
in the ILPTO erroneously think that policy-making is part of their job, then
they can try to impose their will via fee setting, just as the EPO has now
done. Fee-setting is done legally via
rulemaking, with the Justice Minister promulgating the rules, subject to
approval from the Knesset Statute, Constitution and Law Committee. Given the particular personalities currently
involved, it’s not clear that such an attempt at rule making would be
successful, if it were to even gain any traction at all. But that’s how things work in democracies,
even that of the People’s Free Democratic Republic of Israel.

August 21, 2013

It’s been a while since I wrote about how the Israel PTO
deals with the issue of “overlap” between the claims of applications, but that
doesn’t mean the issue has gone away.
It’s still there. In fact, rumor
has it that the higher-ups at the ILPTO will be reconsidering this policy this
year. In light of that, this (admittedly
long) post will address the matter again, presenting the issues involved, why I
think Israel should implement a terminal disclaimer policy similar to that in
the USA, and why I think the legal machinery to implement such a policy is
already in place.

One point of clarification at the outset: this discussion
does not pertain to situations in which there is overlap between the
claims of a later application and the claims of an earlier application (or
patent) which was published before the earliest priority date of the later application. In that situation, under sections 4 and 5 of
the statute, the earlier application is available as prior art against the
later application, and the normal assessments of novelty and non-obviousness
are made.

Rather, the issue of “overlap” arises in situations in which
there are two different patent applications with claims of partly overlapping
scope (e.g. “A table comprising a top and at least three legs” and “A table
having a top and four legs”), and neither application was published before the
earliest priority date to which the claimed subject matter is entitled. The ILPTO long ago adopted the view that in such
cases, the overlapping material must be excised from the later-filed
application, even though the earlier application cannot be cited against the
novelty or inventiveness of the later application. (The “why” of this policy will be explained
shortly.) Within this fact pattern there
are two possible situations: the two applications are co-owned (same
applicant), or they’re not (different applicants). Although the ILPTO ultimately treats both
cases similarly, it uses different legal mechanisms to get there.

Overlapping Claims in Applications Filed by Different
Applicants

In the case of applications filed by two different applicants,
the ILPTO’s practice of requiring the later applicant to excise overlapping
material from its claims is supposedly based on section 9 of the statute:

9. First Comer Wins

If a patent was applied for on one
invention by more than one applicant, the patent shall be granted on the
invention to the one who first applied for the patent in accordance with the
law.

In general, the ILPTO interprets “invention” in this context
to mean anything included within the scope of the claims (but see below re:
selection inventions). Thus, by requiring
the later applicant to amend its claims to eliminate overlap with the claims of
the earlier-filed application, the ILPTO believes it is upholding section
9. From a strict legal construction
standpoint, there is a problem with this interpretation. Section 13(a) of the statute says that “The
specification shall conclude with a claim or claims that define the invention,
provided that each such claim shall arise in a reasonable manner from the
description in the specification”. This would
seem to mean that claims of differing scope define different inventions, even
if those claims overlap, and therefore there is no basis to require limitation
of the scope of the claims of the later filed application. Be that as it may, the rationale for this
policy, evidently, is to avoid the situation in which potential infringers will
have to contend with more than one patent covering the same aspect of an
invention.

Overlapping Claims in Applicant’s Own Applications

Section 9 is limited to situations in which “patent was
applied for on one invention by more than one applicant”. Thus in the case of two applications
belonging to the same applicant, section 9 is irrelevant. Nevertheless, in such situations the ILPTO
will require the applicant to eliminate the overlap between the claims of the
two applications. Again, the rationale
is that if two patents are granted and there is overlap between the claims,
then one of the patents could be assigned to a different entity, leaving
potential infringers with two parties to negotiate with, thus raising the
transaction costs of the negotiations (in the words of Ronald Coase), which is
economically inefficient. The legal
justification for this practice is an alleged violation of section 2 of the
statute:

2. Right to apply for a patent

The owner of a patentable invention
is entitled to apply, in accordance with the dictates of this statute, that a
patent be granted on that invention.

Section 2 says a patent (singular), not patents
(plural), and therefore an applicant may not receive two patents for the same
invention. As with its interpretation of
section 9, in taking a broad view of section 2, the ILPTO ignores section
13(a)’s statement that it is the claims that define the invention. Hence, rather than conclude that claims of
different scope are not claims to the same invention, the ILPTO interprets
“that invention” in section 2 to mean anything falling within the scope of the
claims, so that overlap between the claims of an applicant’s different
applications is precluded. It will be
appreciated that such rejections are sometimes raised with respect to
applications having a parent/divisional relationship, i.e. in which they have
the same disclosure, filing date and priority date.

Selection Inventions

As we have just seen, the rationale behind the ILPTO’s “no
overlap” policy is to reduce transaction costs for parties interested in
licensing patents (or considering mounting challenges to those patents). It will be appreciated that this policy
consideration is waived in the case of so-called “selection inventions”, in
which the later claims are dominated, at least in part, by the earlier claims,
but (a) there is no specific disclosure in the earlier application of
what is claimed in the later application (let alone claims that
specifically claim what is claimed in the later application), (b) the
degree of overlap is small relative to the earlier disclosure, and (c) an
inventive step can be demonstrated for what is claimed in the later application
that overlaps with the earlier claims. Apparently
here the thinking is that since the later-claimed grouping is inventive over
the earlier generic disclosure, the two claimed inventions are not the
same, so section 9 (or section 2, in the case of the same applicant) doesn’t
apply; but why the “sameness” of the invention should be contingent upon
inventive step considerations is unclear. While the selection invention doctrine is
normally applied in the context of published prior art in the obviousness
context, applicants may invoke this doctrine to overcome “overlap” rejections,
whether between their own applications or their application and that of a third
party.

The Present “Overlap” Practice is Inefficient

The concern about an applicant effectively multiplying its
patent pool so that multiple patents cover the same aspect of the same
invention, and the potential for mischief that such multiplication engenders,
is not necessary an illegitimate concern.
Indeed, as will be discussed shortly, US courts long ago recognized this
as a potential problem. But in Israel, having
adopted the view that, in the name of promoting efficiency in hypothetical
negotiations that may or may not take place, “overlap” between co-pending
applications must be eliminated at all costs, the ILPTO has adopted policies
that themselves promote inefficiency of a different kind.

Specifically, examiners spend time looking for and
identifying overlap in applicants’ co-pending applications. Applicants and their patent counsel must then
spend time – in most cases, significant amounts of time – assessing the
veracity of the examiners’ claims, and, where necessary, amending claims to
eliminate the overlap. The examiner who
receives such an amended set of claims must then carefully check to ensure that
the “overlap” has been removed – another time-consuming task, one that inter
alia prevents the examiner from working on other cases. (The problem is compounded in the not uncommon
situation in which an applicant has filed not just two but multiple
applications on closely-related subject matter.)

Alternatively, as noted above, in some cases, applicants may
invoke the selection invention doctrine, but this too necessitates adducing (in
the lab) proof of unexpected superiority, and presenting the results to the
ILPTO.

In addition, the amendment of claims to eliminate “overlap”
may in turn result in a finding of disunity, necessitating the division of an
application as a consequence of the claim amendments. This imposes an additional burden and cost on
the applicant. (The burden is further increased under the ILPTO’s incorrect
no-divisional-of-a-divisional policy, which has been discussed in earlier posts
and hopefully will be revisited in the future.)

US Terminal Disclaimer Policy

As noted above, US courts long ago recognized the problem of
claims of overlapping scope in an applicant’s different patent applications,
and how the grant of several patents having overlapping claims could lead to
“vexatious litigation” if different patents were to be assigned to different
entities. In fact, in the US, the problem
was more acute than it is in Israel: under the pre-1995 US statute, in which
patents had a term of 17 years from the date on which they were granted, but
enjoyed the benefit of the filing date of the earlier application in the
continuation chain, a savvy applicant could theoretically obtain a series of
patents spaced years apart but having overlapping claims. Since the claims weren’t identical, they were
deemed to be directed to different inventions.
Therefore no section 101 rejection (akin to the Israel section 2
rejection described above – applicant is entitled to a single patent,
not multiple patents, on its invention) would arise; and with the
continuation priority in place, the earlier patents in the chain could not be
cited as prior art. Hence an applicant
could in principle extend his patent rights beyond the initial term
by obtaining patents on obvious variations of the same invention, by using
continuation practice to ensure that the patents issued at different times.

What resulted from the courts’ sensitivity to this potential
problem was the judicially created doctrine of “obviousness-type” double
patenting. If the claims of a pending application
are obvious in view of the claims (not the specification or disclosure, but the
claims) of an applicant’s earlier-issued patent (or earlier-filed-but-still-pending
application), then the pending application will not be allowed, on the grounds
that the later claims are an obvious variation of the earlier claims and therefore
in principle could have been included in the earlier patent.

However, this rejection will be waived if the applicant
promises two things: first, that the two patents will always be owned by the
same entity; second, that the term of the later patent will not extend beyond
the term of the earlier patent. In this
way, the possibility of “vexatious litigation” is averted, as is the
possibility of receiving an effective time-wise extension of exclusivity.

This dual promise by the applicant is made in the form of a
document called a “terminal disclaimer”, and its use is so common that the
USPTO even has standard terminal disclaimer forms (here and here) that applicants can
use if they wish. The terminal
disclaimer includes the following wording:

“The owner [of the application in which the terminal
disclaimer is being filed] hereby agrees that any patent so granted on the
instant application shall be enforceable only for and during such period that
it and any patent granted on the [earlier] referenceapplication [or prior
patent, as the case may be] are commonly owned. This agreement runs with
any patent granted on the instant application and is binding upon the grantee,
its successors or assigns.”

The terminal disclaimer is part of the patent’s file
history, and a notice that a terminal disclaimer was filed is published on the
front of the issued patent. And by its
very wording, the terminal disclaimer is binding upon all subsequent owners of
the patent.

Thus the terminal disclaimer addresses the same concerns
that underlie the current ILPTO practice for dealing with overlap between the
claims of an applicant’s own applications. The terminal disclaimer model, however, is a
more efficient way to address those concerns: it spares the applicant the need
to (i) assess the degree of overlap between the claims of co-pending
applications, (ii) devise claims that eliminate the overlap, or (iii) possibly
file divisional applications as a result of the amended claims. And it frees examiners from assessing whether
or not overlap has been eliminated. Moreover,
since both patents will expire simultaneously, it also allows potential
infringers to more easily identify the date on which they may commence
activities that, if performed before that date, would constitute infringement.

Of course, under US practice, an applicant reserves the
right to challenge the propriety of the obviousness-type double patenting
rejection, or to amend its claims to overcome that rejection. But it’s the applicant’s choice – the
applicant isn’t forced to excise the overlap.

The terminal disclaimer effectively allows an applicant to
say, “The claims of these two applications/patents really should be kept
together in a single patent, because the two inventions claimed are not
patentably distinct from one another, and therefore I promise that if the two
patents cease to be commonly owned, the later-issuing patent won’t be
enforceable.” But the legal mechanism by
which the terminal disclaimer operates may be explained in a number of
different ways.

For example, the terminal disclaimer may be conceived of as
a partially conditional dedication of the later patent to the public: if at any
time prior to a certain date (viz. the date on which the first patent will
expire), the ownership of the two patents is split, then the later patent is
dedicated to the public (and is therefore unenforceable). Even if the ownership of the two patents
remains in the same hands, the later patent is dedicated to the public as of
the date on which the earlier patent expires.

Alternatively, the legal mechanism of the terminal
disclaimer maybe thought of as the partially conditional granting of a paid-up,
royalty-free license to anyone who is interested exploiting the patent: if
prior to a certain date, the ownership of the two patents is split, then a
license has been granted to anyone who wishes to practice the later patent. After that date, such a license is granted
even both patents remain owned by the same party.

Other ways to conceive of the mechanism of making the later
patent unenforceable include the partially conditioned grant to the public of a
covenant not to sue; the patentee’s partially conditional forfeiture of the
rights conveyed by the later patent; and the patentee’s acceptance of less than
all the rights to which it would otherwise be entitled (i.e. the patentee explicitly
accepts a patent term in the later patent of less than 20 years from filing if
certain events occur subsequent to the grant of the patent, namely the
splitting of ownership). The latter may
be explained in terms of contract law: a patent is often likened to a contract
between the state and the patent applicant, in which the state agrees to give
the patentee exclusivity for a claimed invention in exchange for adequate
disclosure of a way to make and use the invention. Although the state cannot grant the patentee
more rights (e.g. a longer period of exclusivity) than the law allows, the
patentee can agree to accept less than maximum that the state is allowed to
give. The terminal disclaimer is an
agreement by which the patentee does that.

The terminal disclaimer also states that it is binding on
anyone who steps into the shoes of the applicant, either before or after grant
of the patent. This too can be explained
in a number of ways. Through the lens of contract law, the patentee can be
thought of as agreeing to condition the grant of the patent on the patentee’s
other self-imposed conditions being binding on subsequent owners of the
patent. It can also be viewed as
analogous to an easement or other encumbrance that runs with the land.

If this section has seemed pedantic, it’s been for a good
cause: to show that the terminal disclaimer operates using legal mechanisms and
frameworks that are familiar to American lawyers – and to their Israeli
counterparts. It therefore shouldn’t be
too difficult for Israeli lawyers to get their heads around the terminal
disclaimer idea – and in the next section, I discuss how Israeli law already
contains the legal mechanisms for implementing terminal disclaimer practice.

There is a Mechanism in Israel Law for Introducing Terminal
Disclaimer Practice

Terminal disclaimer practice in the USA utilizes familiar
legal mechanisms, and seeing how the American model works, it doesn’t take a
lot of effort to understand how Israel law likewise has mechanisms that can be put
to similar use. For example, sections
82-88 of the Israel patent statute deal with patent assignments and
licenses. As long as such assignments or
licenses are in writing and recorded with the ILPTO, they are enforceable
against third parties. If, as suggested above,
the terminal disclaimer is conceived of as the granting of a conditional, paid-up,
royalty-free license, then these sections of the statute provide a mechanism
for the implementation of terminal disclaimer practice in Israel: the terminal
disclaimer would be a non-exclusive license (i) granted to everyone (sections
84 and 86), (ii) in writing (section 84), (iii) having effect toward everyone
by virtue of its being recorded (section 87), (iv) with the license’s coming
into force being conditioned (section 86) on the splitting of the ownership of
the particular patent and one or more additional patents listed in the terminal
disclaimer. If the ownership of the
patents is split, the license comes into force and effectively dedicates the
later patent to the public. If the
ownership remains in the same hands, the license has no effect against anyone
until the earlier patent expires.

Alternatively, Israel patent law provides for the
cancellation of a patent by its owner, either actively by informing the
Commissioner that he wishes to cancel the patent, or passively by failing to
timely pay a maintenance fee. A terminal
disclaimer could thus be viewed as a conditional cancellation of the patent,
triggered by the splitting of the ownership or the expiration of the earlier
patent. In a comparable fashion, it could
be deemed to be a conditional gift to the public, in accordance with the Gifts
statute.

Similarly, Israel law provides for imposing conditions on
that are binding upon subsequent owners of property. The Patents statute in particular specifically
provides for patents serving as pledges against obligations, so that ownership
can change hands if the obligation is not fulfilled. The imposition of the conditions of
enforceability upon subsequent owners of the patent can thus be viewed, for
example, as being the emplacement of a limitation on subsequent owners of the
patent, or the pledging of the patent to the benefit of the public, should the
ownership thereof and that of the earlier patent ever split.

Thus the legal tools for implementation of terminal
disclaimer practice in Israel already exist.
That being the case, rather than continuing requiring examiners to look
for “overlap” between applications (instead of examining substantive
patentability issues), and rather than requiring applicants to spend time and
money figuring out ways to eliminate such overlap, the Commissioner should
offer applicants an easy out: file a terminal disclaimer and make the “overlap”
problem between the applicant’s different applications disappear. This being the Hebrew month of Elul, with
Rosh Hashana just around the corner, now would be a good time for the ILPTO to
admit the error of its ways and repent by making terminal disclaimer practice
available to patent applicants in Israel.

September 03, 2012

In an e-mail message sent out last week by the Association of Patent Attorneys in Israel, a voluntary professional association similar to the National Association of Patent Practitioners in the USA, it was announced that on September 20, a meeting will take place at the Israel PTO between patent practitioners and the examination corps at 14:00. People wishing to participate to should send an email to sabitan@rcip.co.il. A list of topics will be sent to the ILPTO on September 4, although people with questions were asked to submit them to avi@benami.com by September 2; there was no word in the announcement regarding what kind of a filtering process, if any, the questions would go through prior to be sent to the ILPTO, or who would be doing the filtering and what criteria would be used. Although there was nothing in the announcment saying that participation is limited to persons having a license to practice before the ILPTO, curiously, the ILPTO didn't announce the meeting through its own email list, which presumably includes many interested parties who are not on the distribution list used by the Association. A copy of the full annoucement in Hebrew appears below.

August 17, 2011

One of the big local stories in Israel earlier in the summer was the outcry over the price of cottage cheese. For many Israelis, this is a staple item. June was when someone noticed that the price of cottage cheese had crept up precipitously over the last few years – and that the same locally-produced cottage cheese sold for less in Europe than it did in Israel. So this person decided to do something about it: he used Facebook to organize a boycott. Turns out that not only had the three major dairies (which collective control close to 100% of the market) raised their prices significantly, and almost in lockstep, since the de-regulation of the price of cottage cheese a few years earlier, but one of them had even commissioned McKinsey to tell them how much they could raise prices without losing business.

In the end, the dairies caved and lowered their prices, at least a bit. (Don’t worry, as of this writing the price of cottage cheese isn’t that much lower than before the protest, the dairies are still gouging consumers on everything else they produce, and like lambs Israeli consumers aren’t complaining.) But the part of this story that interests me is the notion of price elasticity, or rather inelasticity: the idea that in certain markets, the demand for an item will remain essentially steady no matter what the price, and therefore producers are free to raise prices without fear of loss of sales. Clearly, with regard to cottage cheese, the dairies felt that the de facto staple status of this commodity, coupled with the lack of local or foreign competition (no one imports cottage cheese into Israel) meant that they could steadily raise the price and make ever-larger profits. The same is true of the fees charged by banks for doing us the favor of holding on to our money, the fees charged by cellphone companies, and the prices of many other goods and services in Israel.

On the other hand, in early July the price of name-brand diapers in Israel fell - dramatically. Here it wasn’t the threat of a boycott that caused the price reduction but old-fashioned competition. Both Pampers and Huggies have arrangements with local manufacturers; until recently those diapers retailed for around 62 shekels a package at all of the large supermarket chains. Since parallel imports are legal in Israel (no, that’s not the IP angle of this story), one of those chains, Mega, decided to draw customers by importing a large number of Huggies from Turkey, at a price that was lower than what the local Huggies manufacturer charges Mega; Mega then offered the diapers at a much lower retail price. In mid-July, for example, Mega advertised Huggies for 26 shekels per package for customers who buy 100 shekels’ worth of other products.

It didn’t take long for the price of locally produced Huggies and Pampers to drop as well. For example, for a while Supersol Deal, another large chain, sold both brands for 36 shekels per package, i.e. at a price 42% lower than it was a few weeks previously. The fact that the prices of these diapers could drop so dramatically suggests that hitherto a certain degree of price inelasticity was at work – even though, unlike with cottage cheese, there are also local brands which normally sell for lower prices than Pampers and Huggies.

What does this have to do with patents in Israel? Well, as far as I can tell, there are some movers and shakers within the patent department of the Israel PTO who think that the price of the services they provide is also inelastic. Or at least there are several ways in which the ILPTO acts as if it can charge what it wants without repercussion. Consider:

1. Until relatively recently, if a patent examiner said that an applicant’s claims were directed to more than one invention, that applicant could cancel claims on the second (and third, fourth, etc. inventions), and file them in a divisional application. The divisional could be filed any time before the parent application was laid open to the public, and the only fee due was the filing fee for the filing of the divisional. In June 2008 the previous Commissioner issued his circular no. MN 62, which said that a divisional filed in response to an office action containing a finding of disunity had to be filed along with the response to the OA. A divisional could be filed after that time, but if so, it would have to be accompanied by an extension fee for each month or portion thereof after the deadline for response to the OA in the parent case.

2. Additionally, longstanding practice in Israel was that if one had already filed a first divisional, and one wished to further divide that first divisional by filing a second divisional application, the second divisional could be filed at any time before the first divisional was laid open to the public, even if that event occurred well after the original parent case had itself been laid open for public inspection. As discussed previously, in February 2010 the previous Commissioner indicated that all divisionals, whether divided directly from the parent case or indirectly from an already-filed divisional, had to be filed before the original parent case was laid open to the public.

3. Also as discussed previously, under the previous Commissioner, the ILPTO began to charge applicants for suspending the examination of their applications.

4. There used to be no limit on the total number of claims in an application. In 2010, the ILPTO successfully lobbied the Justice Minister to amend the regulations so that a fee of 500 shekels would be assessed for each claim over 50 (at the time, the filing for a new application was about 1500 shekels).

5. Israel, like England, is a “loser pays” system when it comes to inter partes matters, whether in court or before the PTO. Whereas traditionally the fee awards granted to the prevailing party in patent oppositions or cancellation actions were largely symbolic, usually not more than a few thousand dollars and often even smaller, in recent years those awards (as well as awards in similar trademark disputes) have just become plain large, in some cases over $100,000. (A more detailed discussion of this phenomenon will be forthcoming in a future post.)

In the first four cases, the monies collected go the ILPTO, and thus can be viewed as attempts by the ILPTO to squeeze money from applicants, and to squeeze it from them earlier in the process, e.g. by collecting filing fees for all divisionals sooner rather than later. My speculation is that the impetus for this was the ILPTO’s change in status from a mere branch of the Justice Ministry to a semi-autonomous “Authority” under the general aegis of the ministry. The change was effected under the previous Commissioner at his behest. While the new status helped streamline ILPTO operations by giving it more control over its own spending, the new status also meant that the ILPTO became responsible for raising its own funds to cover its budget, including paying the salaries of its staff. Coupled with the fact that the previous Commissioner went on a hiring spree and significantly increased the number of examiners (which in and of itself was a good thing), the need for revenue became more acute than it was previously.

The fifth case is a little different, because the funds go to one of the parties to the proceedings, not to the ILPTO. Nevertheless, when taken together, the five phenomena suggest a view on the part of the ILPTO that no matter how high the expected cost of availing oneself of the Israel patenting process, people and companies will file patent applications at the ILPTO. After all, the ILPTO has a monopoly on the granting of patents, so do people have a choice?

That view, of course, is just plain wrong, as is clear from a glance at other, larger jurisdictions. Take the PCT filing statistics for 2008 and 2009, for example: when the economy tanks, patent filings drop. Or look at the Dudas administration at the USPTO, which perversely calculated that by making it unattractive for people to file patent applications, in part by making it prohibitively expensive to do so (inter alia via onerous claims-and-continuation rules), fewer applications would be filed, which would have enabled the USPTO to reduce its backlog in patent examination.

Israel is not a large market; people and companies, particularly those from outside Israel will only continue to file in Israel if they think it’s worth their while. I don’t know the location of the cut-off point beyond which companies will say it’s no longer worth the expense to file in Israel, but such a cut-off point exists. Continually raising the cost of patent prosecution brings us closer to that point, and the ultimate end result wherein raising fees nets less money for the ILPTO.

March 09, 2011

During a discussion with a colleague following my last post on “overlap” rejections in the ILPTO, it became apparent that a few additional points regarding such “overlap” rejections – in contrast to US practice - bear mentioning. The first of these, which pertains to divisional applications, will be discussed in this post. The second, which pertains to the erroneous basis for the ILPTO’s view on “overlap”, will wait for a subsequent post.

“Overlap” in Divisional Applications

In both the USA and Israel, the claims of a patent application must be directed to a single invention. If the claims are directed to more than one invention, the examiner may instruct the applicant to restrict his claims to a single invention. Although the details of the practices in the two countries differ – U.S. restriction practice remains a source of much confusion for both applicants and examiners alike – the basic contours of the law are the same in both jurisdictions: unless the applicant can convince the examiner that the claims are directed to a single invention, the applicant must choose which invention he wishes to have examined. He may then file claims on the remaining invention(s) in one or more “divisional” applications, which have the same effective filing date as the earlier application. I’ll call such applications “involuntary” divisional applications; applicants may also voluntarily divide their applications, even in the absence of a finding that the claims of the parent application are directed to more than one invention.

Now suppose that an examiner has said that the claims are directed to two inventions, and as a result the applicant has divided his application. The divisional is still pending, and the parent case has matured into a patent. (Occasionally, the reverse occurs – the divisional issues first.) Can the examiner now say that the claims of the still-pending application are obvious in view of the granted patent, i.e. can the examiner make an obviousness-type double-patenting rejection on the basis of the related parent (or child) patent? In the U.S.A., 35 U.S.C. §121, the relevant part of which is reproduced here, protects applicants in such a case:

If two or more independent and distinct inventions are claimed in one application, the Director may require the application to be restricted to one of the inventions. If the other invention is made the subject of a divisional application which complies with the requirements of section 120 of this title it shall be entitled to the benefit of the filing date of the original application. A patent issuing on an application with respect to which a requirement for restriction under this section has been made, or on an application filed as a result of such a requirement, shall not be used as a reference either in the Patent and Trademark Office or in the courts against a divisional application or against the original application or any patent issued on either of them, if the divisional application is filed before the issuance of the patent on the other application. * * *

In other words, if you file a divisional as a result of a restriction requirement, the examiner can’t cite the parent patent against you; or vice versa, if the child application matures into a patent first. That seems fair enough: if the USPTO was of the view that the claims were directed to two patentably distinct inventions, it shouldn’t be allowed to reverse course later and say that they’re not patentably distinct, and that one invention is obvious in view of the other. Put differently, §121 statutorily creates an estoppel against forcing applicants to divide their applications, then using one of the two applications to impugn the other.

Unfortunately, there is no similar statutory provision in Israel. And although logically, for the reasons explained in the previous paragraph, the ILPTO should be estopped from citing a parent case against a divisional or vice versa when it was the ILPTO itself that ordered the division, there is (as yet) no case law saying that such an estoppel exists. As a result, it’s not unusual for an Israel examiner to tell an applicant to divide its application, and then, after the applicant has filed a divisional along the lines delineated by the examiner, to assert that there is “overlap” between the claims of the two applications.

Given that significant statutory changes are in the pipeline (which the subject of a post in the not-too-distant future), the Justice Ministry should consider proposing a statutory amendment that would correct this situation as well, and which would explicitly state that if an applicant divides his application in accordance with a finding of disunity issued by the ILPTO, the ILPTO cannot later reject one of the two applications over the over because of “overlap” or double-patenting.

The lack of either a statutory provision or explicit case law (at least as of today) against this sort of “double jeopardy” takes on added significance in view of the position announced by the ILPTO last year that it would no longer permit the filing of divisionals of divisonals once the earliest application in the chain has been published for opposition purposes. As explained in an earlier post, the ILPTO’s position regarding divisionals of divisionals has no basis whatsoever in the statute. Not that things like statutory wording ever stopped the now-ex-commissioner from doing whatever he felt like doing. Which may be why the now-ex-commissioner, in a clarification issued after the moratorium on divisionals of divisionals was announced, stated that if an examiner tells an applicant to divide an application, the applicant does so, the parent case publishes, and then the examiner says the divisional contains two inventions, the applicant has to choose which of the inventions in his divisional he wants to keep and which to jettison, because he has lost the right to file his divisional. While I’m certain that sooner or later, the ILPTO’s position on this will be litigated, and the ILPTO will lose, repeal of this ill-considered and ultra vires policy would be more efficient and less costly. It should be one of the incoming Commissioner’s first acts in office.

February 14, 2011

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

§101 has received much attention in recent years in the context of litigation over what kinds of inventions are and aren’t eligible for patent protection, last June’s Supreme Court Bilski decision and the CAFC’s Myriad Genetics case later this term being the most prominent examples. But there’s another aspect to §101 that, fortunately, hasn’t been the object of attention for quite a while: the limitation that a person may only receive a single patent on his invention. In U.S. parlance, the statutorily prohibited practice of getting two patents on the same invention is called “double patenting”. The logic of the case law in this regard is that the statute says an inventor may receive “a patent”, in the singular, not “patents” in the plural.

In some ways, though, that statement is specious. The fact is that through the filing of continuations and divisionals, applicants routinely get more than one patent for what any reasonable person would regard as the same invention, or at least part of the same invention. But here the case law make a neat distinction that only a lawyer (as opposed to a reasonable person) could love: “invention” in this context means “claimed invention”, as in the invention as defined by the claims of the patent. So if two claims in an inventor’s two patent applications are close to each other but don’t claim quite the same thing, he doesn’t run afoul of §101’s prohibition on double patenting.

To illustrate – and if you’re a U.S. practitioner, you can skip down to the discussion of Israel – suppose you’ve got a patent with two claims,

“1. A table comprising four legs and a square tabletop” and

“2. A table comprising four legs and a triangular tabletop.”

If in addition you have a still-pending application that claims, “3. A table comprising four legs and a tabletop having a shape selected from the group consisting of square and triangular”, that last claim might be shot down for a host of reasons, but the double-patenting prohibition of §101 isn’t one of them. Even though the scope of claim 3 is the same as the scope of the two granted claims when taken together, the scope of claim 3 when compared to either of the granted claims individually is different. Consequently, there’s no double-patenting issue under §101.

But wait, the non-practitioner cries in shock and amazement, how can that be?! Claim 3 is so close to the first two, how can it be allowed in the face of them? The answer is, under U.S. law it can’t, but not because of §101’s double-patenting prohibition. There’s a second double-patenting prohibition that has its basis in case law rather than the statute. That prohibition is called obviousness-type double patenting, and it has its origins in a time when U.S. patents were issued for 17 years from the date of grant. Referring back to the example above, if claim 3 issued in a patent on a later date than the patent containing the first two claims, the later expiration date of the later-issued patent would effectively give the patentee an extension of his period of exclusivity for what is an obvious variation of claims 1 and 2 in the first patent. Put differently, inasmuch as claim 3 is an obvious variation of claims 1 and 2, there was no reason the patentee couldn’t have included claim 3 in the same patent as claims 1 and 2. To now grant him claim 3 in a later-expiring patent wouldn’t be fair to the public.

An additional problem with granting claim 3 in a separate patent is that the patentee could in principle sell the first patent but not the second patent, or vice versa. This would make it difficult for potential licensees to negotiate a license, since they would now have to negotiate with two parties instead of one. (In law school-speak that’s called raising transaction costs, and it’s considered to be a bad thing because higher transaction costs lead to sub-optimal allocations of resources.) Even if a competitor designed a work-around to avoid infringement of either patent, he might still need to defend against infringement suits from two parties instead of one, with concomitantly higher legal expenses – what the case law calls “vexatious litigation”.

To avoid these twin problems, over the years U.S. courts developed the doctrine of obviousness-type double patenting: an applicant can’t get claims in a later patent that are obvious in view of the claims in an earlier-granted patent of that same applicant. However, unlike statutory double-patenting, which can only be remedied by amendment or cancellation of the offending claims, an applicant or patentee can overcome o.t.d.p. without amending or canceling his claims. He does this by filing a notice at the USPTO that says (a) the applicant or patentee disclaims the term of the later-granted patent which extends beyond the term of the earlier-granted patent [thus obviating the patent term-extension aspect of the later-granted patent], and (b) in order for either patent to be enforceable, the two patents must be owned by the same entity [thus obviating the threat of “vexatious litigation” that concerned the courts]. This statement, called a “terminal disclaimer”, is so common that the USPTO even has a standard form that can be used for it. (Although the U.S. moved to a 20-years-from-earliest-filing system in 1995, which has eviscerated the first reason for o.t.d.p., the case law has not caught up in this respect, perhaps because the second reason for o.t.d.p. remains.)

Turning to my local environs, Israel too has a statutory prohibition on double-patenting: §2 of the statute says that the owner a patentable invention may apply for a patent on that invention. As in the USA, the courts in Israel have said “a patent” means one, not two or more. However, when it comes to obviousness-type double patenting, Israel still lags behind. Again taking the example from above, whereas in the U.S.A. claim 3 would be rejected for obviousness-type double patenting, here in Israel the patent office would say, “Claim 3 overlaps with claims 1 and 2 of your earlier patent/application.” At which point the applicant would scratch his head and say, “Yeah, so what? There’s nothing in the statute against overlap. What do you want from me?”, because indeed nowhere in the statute does it say that “overlap” between claims is verboten.

So what does the ILPTO mean when it says there’s “overlap” between the claims of one’s later application and one’s earlier application? There are a few possibilities. It could be trying to say, you’re claiming the same invention in two different applications, which is prohibited by section 2 of the statute, and thus we can’t allow the claims. The problem with that explanation is that since it’s the claims that define the invention – section 13 of the statute say so – then claims that merely overlap in their scope aren’t really prohibited under section 2. And besides, if it was a section 2 issue, then why not just say so, instead of saying “there’s overlap”?

Or the ILPTO could be trying to say that the later claimed invention is anticipated by, or obvious in view of, the earlier claimed invention. But here too, if that’s the case why not just say that the later claims are anticipated or obvious? Moreover, the ILPTO will reject the claims of a divisional application for “overlap” with the claims of the parent application; but since a divisional and its parent share the same priority and filing dates, the parent can’t be cited against the divisional as a basis for anticipation or obviousness.

So by deduction, if “overlap” isn’t shorthand for rejections under sections 2 (statutory double patenting), 4 (novelty) or 5 (inventive step) of the statute, then what the ILPTO is trying to get at in its clumsy, communication-challenged way when it issues an “overlap” rejection are the same two factors that gave rise to the obviousness-type double patenting doctrine in the USA – the possible extension of the period of exclusivity for some of what is claimed in the first application, and the ability to split ownership of the patents, making life unnecessarily difficult for competitors.

If “overlap” is meant to be shorthand for “obviousness-type double patenting”, then it follows that the ILPTO has adopted a terminal disclaimer practice like that in the USA, right? Silly you. Why be so sensible? Under current Israel practice, the only way for an applicant to overcome an “overlap” rejection is to convince the examiner there is no overlap, or to excise the offending material from the claims of the later application. In chemical cases in which large genera of compounds are claimed in both applications, that can involve significant analysis on the part of the applicant or its attorney – i.e. it can both be a pain and cost a lot – and it can lead to the introduction of multiple provisos, which makes ascertaining the scope the claim so amended somewhat difficult. The introduction of such carve-outs also necessitates significant examiner time checking to make sure that all of the “overlap” has been eliminated. (I once sat with an examiner for three hours painstakingly going over a proposed amendment to be sure he was satisfied that all "overlap" between two applications had been removed.) Filing a terminal disclaimer would be a much simpler, less costly and more efficient route to achieve the same end.

Moreover, unlike many of the policies that the (mercifully, now ex-) Commissioner instituted over the past few years, with which he clearly overstepped his authority, the implementation of a terminal disclaimer program is something that is within his purview. And it’s fairly in keeping with other aspects of Israel patent law: assignments and liens on patents, for example, are recorded at the ILPTO; there’s no reason a stipulation of joint ownership between two patents as a condition for their enforceability couldn’t also be recorded at the ILPTO.

Hopefully the next Commissioner (we’re still waiting for an announcement) will be someone with enough patent experience to appreciate how useful terminal disclaimers can be, and who will be willing to allow their use before the ILPTO.

February 17, 2010

Ok, I know that if made into a video, the subject of this post won’t sell as many copies as Girls Gone Wild, nor are its effects as wide-ranging as, say, Jon Dudas’ lame (and, mercifully, now late) attempts to circumvent the rule-making process in the USA.But for those of us who practice patent law in this neck of the woods, the Commissioner has displayed a remarkably cavalier attitude toward the very statute that creates the position he now occupies.

First, there was the announcement by the Commissioner that if an examiner has determined that an application contains claimed directed to more than one invention, then that applicant must file a divisional application along with its response to the examiner.Divisionals filed after the deadline for response will only be accepted upon payment of an extension fee for each month of “lateness” in filing.The Commissioner asserted that this policy was dictated by the statute, but it’s not clear that the statute really supports him on this point – and indeed, in the 40 or so years prior to the Commissioner’s announcement that the statute had been in force, none of his predecessors adopted this view.However, since the cost of an extension is only about $16/month, it will almost always be cheaper for an applicant to wait and see if it wants to file a divisional, and then pay the extension fees, than to pay a lawyer to challenge the Commissioner’s view.

The next month, as discussed previously in this blog, the Commissioner imposed a requirement to submit an abstract, thus foisting on the applicant a requirement that the statute imposes on the Commissioner himself.

Then we had the now-you-see-it, now-you-don’t case of Australia as a country upon which one could piggy-back under §17(c) of the statute to gain allowance of a corresponding Israel application.In December 2008 the Commissioner announced that he was taking Australia off the list because experience had shown it to be unreliable (i.e. Australian examinations weren’t very good); in September 2009, he reinstated Australia, without providing reasons.While the statute empowers the Commissioner to list and de-list foreign patent offices in this manner, it presumes he makes such determinations based on objective criteria of the quality of foreign examination.Here, the quick change of heart, without accompanying reasons, raised eyebrows.In retrospect, it appears that the change of heart was motivated not by a substantive change in the situation but by politics, as part of the Commissioner’s efforts to get Israel recognized as a PCT search authority.

Next came more extensive reporting requirements under §18 of the statute (the rough equivalent of IDS practice in the USA).§18 empowers the Commissioner to ask an applicant to provide a list of documents cited during the examination of corresponding applications elsewhere, or which are known to the applicant to be relevant to patentabilty, as well as copies of those documents.The related Rule 36(1) says that pursuant to §18, before beginning examination, the Commissioner will send a letter to the applicant asking that he provide these documents.Rule 36(2) says that when an applicant responds to such a request, he may include copies of his arguments submitted in response in the foreign jurisdiction(s).Note that this is purely at the Applicant’s discretion.

But in January of this year, the Commissioner announced that henceforth, applicants would be required to include copies of those answers, insofar as they relate to novelty and inventive step, and that failure to include such arguments would be regarded as failure to respond to the request under §18.Nevermind that the statute itself does not empower the Commissioner to request copies of arguments filed abroad.Or that in the cases of Europe and the USA, those documents will almost always be freely available over the internet, and that ILPTO examiners are already adept at finding those corresponding documents.Better to act ultra vires and impose unnecessary reporting requirements on applicants than to have Israel examiners engage in a few extra mouse clicks.

Next up, limits on the number of independent claims.About two weeks ago the Commissioner circulated another notice, this one informing people that the ILPTO would only accept two independent claims “of each type”, viz. one or independent claims on a product, one or two for a process for making the product, one or two for an apparatus for making the product, and one or two for using the product.Ostensibly the Commissioner was merely reminding the public of long-standing ILPTO practice, as most recently enunciated in a 2004 decision of this same Commissioner.However, there really is no basis in law for the arbitrary limitation of the number of independent claims; and in point of fact, I’ve personally prosecuted applications with numerous independent “Swiss” claims, which belies the assertion that this really represents long-standing ILPTO practice.

Finally, we come to this week’s gem.Rather than paraphrase the Commissioner, I translate here his entire missive:

Commissioner’s Circular No. MN81

15 February 2010, 1 Adar 5770

To: The Community of Applicants, Patent Agents and Lawyers

From:Dr. Meir Noam, Commissioner of Patents, Designs and Trademarks

Re: Division of Patent Applications

The purpose of this Circular is to inform the public of the interpretation given by the Patent Office to §24(a) of the Patents Statute, 1968 – 5728 [NOTE: this is a typo – the statute was passed in 1967; it is the Rules that were adopted in 1968 and reflect this in their title.But that’s small potatoes in the present context - DJF].

1.§24(a) states the following: “As long as the application has not been accepted [i.e., opened to the public for inspection following completion of substantive examination – similar to publication in the USPTO Gazette in the pre-18-month publication days – DJF], the applicant may demand that it be divided into individual applications.”

2.This section is given to two interpretations: one, that the parent application, and it alone, may be divided until the date of acceptance; the other, that the parent, and any application divided therefrom, may be divided until each one has been accepted.

3.The Office hereby serves notice that the interpretation which shall be adopted is that it is the parent case, and it alone, that may be divided until the date of acceptance, and this, inter alia, because of the need to conclude examination proceedings in a reasonable time and because of considerations of legal certainty for the general public.

4.This circular shall take effect as of the date of its publication on the Patent Office’s web site.

There are several difficulties with this circular.For starters, if one is already going to distinguish between a parent application and a divisional in terms of the ability to further divide, then there are actually three possibilities, not just two as stated in the Circular:

A. Both the parent and divisional can be divided, the parent until its acceptance and the divisional until its acceptance.

B. Both the parent and divisional can be divided, but the deadline for dividing in both cases is the date of acceptance of the parent application.

C. Only the parent case can be divided, and the deadline for doing so is its acceptance date.

While the Commissioner is trying to rule out A, it’s not clear from the Circular if he’s settled on B or C as the solution.(One wonders if in drafting this Circular he received assistance from some of the people at the USPTO who drafted the now-defunct claims and continuation rules, which after their publication required various clarifications of the ambiguities inherent therein.)

The bigger problem is that the statute simply doesn’t say what the Commissioner says it says.Other than giving a divisional the same filing date and priority claims as the parent case, the statute does not distinguish between a divisional and any other application; once a divisional has been filed, the statute treats it as an application like any other, including for purposes of §24(a).Were the Commissioner’s view correct, then the statute would throughout need to distinguish between divisional and parent applications.But it doesn’t.

This can be seen most acutely by comparing §24(a) to §24(b), which states “If an application contains more than one invention, the Commissioner may, as long as he has not accepted the application, order the applicant to divide his application”.The applicant then divides his application in accordance with §24(a).Now suppose that I timely file a divisional, then the parent case issues, and now the examiner says my still-pending divisional claims encompass two inventions.According to one notice already mentioned above, that constitutes an order to divide the application under §24(b).Yet according to the latest circular, I CAN'T divide the application at that point, since under §24(a) a divisional, if it can be further divided at all, can only be divided until its parent case has been accepted (“application” in §24(a) referring to the first-filed case in the series) and in this scenario I’m already past that stage.

So in this scenario I respond in either one of two ways.I could say, Mr. Examiner, you’re no longer empowered to issue an order under §24(b) – you missed the deadline to tell me to divide the application, since the parent case was already accepted, and “application” in §24(b) refers to the same parent application as does §24(a).Or I could respond, Mr. Examiner, you’re empowered to tell me to divide the application, since the terms “application” and “accept”, respectively, in §24(a) and §24(b) mean different things, but now you’ve given an order with which I can’t comply, since §24(a) prohibits me from dividing my application after its parent has already been accepted.

The second answer makes no sense.Why would the statute use similar phrasing in §24(a) and §24(b), yet have that phrasing mean completely different things in the two contexts?And why would the statute empower the Commissioner to order an applicant to do something that the statute in the immediately preceding line prohibits?

But the first answer makes no sense either: inasmuch as §8 stipulates that a patent shall be granted on only one invention, clearly the Commissioner must be able to tell applicants to divide their applications whenever he finds that an application is directed to more than one invention.

In addition to the logical inconsistencies with the Commissioner’s position, it’s also interesting to note that in the over 40 years since adoption of the statute, not once has any previous commissioner or any court ruled that the time limit for filing a divisional of a divisional is the publication date of the parent case, let alone that filing a divisional of a divisional is verboten.And given the large number of pre-grant patent oppositions filed in Israel, if indeed the filing of a divisional of a divisional was impermissible under the statute, surely someone would have cited this as grounds to oppose the grant of a divisional-of-a-divisional.But that hasn’t happened either.How reassuring to know that after 40-some years, this Commissioner has finally gotten it right.And that he will no doubt have to entertain some opposition or revocation actions against divisionals-of-divisionals on the grounds that they were improperly filed.(One wonders if he’ll be willing to refund, with interest, all the examination, publication and renewal fees paid by those applicants over the years for those divisionals-of-divisionals that he maintains the ILPTO should never have accepted in the first place.)

Finally, we have paragraph 4 of the circular.This paragraph isn’t problematic so much as telling.When one enacts a new policy that changes the status quo, that policy needs a starting date.But if we’re talking about statutory interpretation, jurisprudential theory says that that interpretation has always been the correct one.If indeed §24(a) says that one can’t file a divisional of a divisional, or that one can but the time limit for doing so is the publication of the grandparent case, then §24(a) has said this since it was adopted and came into force in 1967.We don’t need to be told the proper interpretation of this section this in 2010, let alone be told when this interpretation will come into force.

Thus the inclusion in the Circular of a paragraph announcing a starting date is a sort of Freudian slip.This inclusion suggests several things.It suggests that the Commissioner doesn’t believe what he wrote.It suggests that that he knows full well that divisionals-of-divisionals are permissible, and that the deadline for filing a divisional from an existing divisional application is the acceptance date of the existing divisional, not of the grandparent case.And it suggests that that he knows the issue of “interpretation” is merely a fig-leaf meant to mask his disregard for the plain meaning of the statute, and for the democratic process.I’m not fooled.

I am, however, insulted.There may be arguments to be made for and against allowing divisionals of divisionals (though I can’t really come up with a good argument against; the fact that the EPO isn’t fond of them means they’re probably a good idea).But hitherto Israel has allowed them, and the statute that permits such filings remains unchanged.If anyone feels that the policy embodied in the statute should be changed, they are free to make their arguments in the public sphere and to lobby the Knesset to change the statute.It is not the place of an unelected bureaucrat, whose position is an administrative and quasi-judicial one, to usurp the prerogatives of the public and the public’s elected representatives, and to arrogate for himself the role of policy-maker.That Dr. Noam acts as if he may do so constitutes a slap in the face to the Israeli public.

Then again, maybe the Commissioner just views this as good business: after convincing the powers-that-be to allow the ILPTO to undertake a significant hiring increase in the last several years, and following a significant drop in the number of new applications filed in Israel in 2009, the Commissioner may be looking for ways to increase the ILPTO’s workload, so all those examiners don’t sit there twiddling their thumbs.But if that’s the case, why require applicants to do the examiners’ work for them by providing examination reports and responses from abroad?

Unlike the Commissioner’s other forays into ultra vires land, I believe that this one has a reasonable chance of being directly challenged.It’s not inconceivable that a pharmaceutical company will have a third-generation divisional application that it wants to get on file; or perhaps an adverse party will challenge an application or a patent on the grounds that it is a third-generation divisional.

On the other hand, maybe here too Dr. Noam will side-step the bullet.Most pharma patents in Israel are handled by a few large offices, who will be more than happy to advise their clients that all divisionals need to be filed before the parent case is accepted – a position that just happens to align with those offices’ interests in cash flow.

May 08, 2009

Israel has both pre-grant patent oppositions as well as post-grant revocation proceedings.Sometimes the PTO’s decisions in these proceedings make sense.Sometimes they don’t.A recent opposition decision, Unipharm v SmithKline Beecham (opposition to patent application no. 117035) falls squarely into the latter category.In fact, it’s so egregiously bad it’s going to provide fodder for several posts.I will leave a full discussion of the facts, and my criticisms of the PTO’s reasoning (or lack thereof) for another day.

Today I provide a brief synopsis of the facts and two practical implications for practice before the Israel PTO.For those who don’t have time or patience to read all the way through even this brief presentation, the practical implications are as follows:

(1)

If you have a particularly valuable application pending in Israel that has claims to different types of statutory subject matter, you should consider dividing the application, even if the ILPTO doesn’t tell you to do so.This is because if the application is opposed, and claims directed to one class are found to be unallowable, the claims to the other class(es) may go down as well, solely on the grounds that they are grouped with the unallowable claims.

(2)

When citing your own earlier application as prior art to the Israel PTO, be sure to cite all the priority applications for that earlier application, unless you’re sure your earlier application contains all the statements that appeared in the priority application.Failure to do so can be deemed to be the Israel equivalent of inequitable conduct.

In a decision given April 16, 2009, the Deputy Commissioner (DC) sustained an opposition to an SKB application that claimed crystalline paroxetine hydrochloride anhydrate (PHA) and a method for making this material.The DC ruled that the material per se was not novel, because SKB had earlier produced the material.SKB had argued that since the (published) method by which the material had originally been made stopped working a few years later, and at the time the subject application was filed, that known method yielded the hemi-hydrate, not the anhydrate, there was no enabling description in the prior art at the time the subject application was filed.Therefore, said SKB, the anhydrate per se was novel at the time the application was filed.The DC rejected this argument and said that the crystalline anhydrate per se existed, and therefore the claims on this material were anticipated.

There were two unfortunate parts of the decision.The first was that although the DC acknowledged that the newly-claimed process for making the anhydrate was novel and non-obvious (it took several years for SKB to develop the new process, and the process itself involved crystallizing the anhydrous material from an aqueous solution!), he nevertheless refused to allow the method claims, saying that since they were grouped in the same application as the unallowable crystalline form claims, the method claims too had to fall - even though he could have exercised his discretion and allowed the method claims, or ordered their division from the unallowable crystalline form claims.

The second unfortunate part was the DC’s determination that the entire application should also be rejected for failure to disclose prior art.This part of the decision stemmed from the fact that although SKB mentioned in the application itself the earlier patent, EP 223403B1, which disclosed PHA, SKB did not disclose the existence of an earlier British application from which the ‘403 patent claimed priority.As will be discussed in a later post, there were slight differences between the priority document and the patent, and apparently the DC felt that these differences were sufficient to warrant non-issuance of the patent – the Israeli equivalent of inequitable conduct in the U.S.A.

This is the first opposition of which I am aware in which the ILPTO refused otherwise allowable claims on the grounds that they were grouped with unallowable claims.Had GSK divided the application and filed the method-of-making claims in a divisional, the DC could not have invoked these grounds for rejecting the claims.And while it is not the first opposition in which an application has been shot down for failure to disclose prior art, it is the first of which I am aware in which the non-disclosed prior art was a priority application for a patent that the applicant did disclose.

It is unclear if this case will remain an isolated instance with regard to the grouping of non-allowable claims with allowable claims, or heralds a new approach from the ILPTO.It could just be an isolated case, as the rejection of the method claims may have been the DC's way of punishing the applicant for attempting to obtain claims on a material that the applicant acknowledged had at one time been known; this particular fact pattern is unlikely to repeat itself, and thus the PTO may be unlikely to invoke suchpunitive measures again.It could also be an isolated instance because this part of the decision may be deemed on appeal to be dictum: since DC also ruled that the entire application was unallowable for failure to disclose prior art, it may be that the DC's statements about the grouping of the claims isn't part of the holding.

If, however, the DC's statements indicate a new approach on the part of the ILPTO (even if in this case are they are deemed to be dicta), this new approach places applicants in a tenuous position: once an application has been accepted (i.e. published for opposition), an applicant may cancel claims from the application, but he cannot expand the scope of the claims and he can no longer file divisionals (although, as mentioned above, the Commissioner can order division during an opposition).Thus applicants in Israel may now be facing the choice of (possibly unnecessarily) dividing the application during ex parte prosecution, or not dividing but then losing otherwise valid claims because the applicants weren't prescient enough to know that some of the other claims wouldbe found invalid during opposition, thus dragging the rest of the application down with them.

Because of this decision, its uncertain impact (GSK still has time to appeal the decision, and it cannot be predicted when a decision will be given in the appeal if filed), and the fact if adopted as policy by the ILPTO, applicants' hands will be tied oncetheir applications are published, it appears that in cases of important applications having claims directed to different statutory classes (composition of matter, method for making, pharmaceutical composition and use), applicants should consider voluntarily dividing the application before acceptance.

As to the failure to disclose the priority document, if the DC’s determination stands, then it would seem incumbent upon applicants, at least when citing their own prior patents or published applications, to also cite the corresponding priority applications.